The first session of the week delivered a few curiosities, but no game changers. Healthy overnight drops in both gold and stock futures gave the impression that their daily cycle declines would put a foot forward today, but it was not to be. Gold recovered all its early weakness to close flat, and the dip was not even strong enough to break the cycle trend line. Likewise, equities erased their own overnight losses and even rallied enough to set a new cycle high.

Despite the strong finish, equities are still in the grips of a trend line crawl, which I fully expect to presently break lower. In fact, the smart money confidence survey published by sentimentrader.com plunged to 33% at the end of last week. A reading in the low 30s corresponds to a level of smart money pessimism usually reserved for intermediate tops.

Taking this cue in conjunction with the late stage of the daily cycle, I added to my short side play Sunday night by selling S&P 500 futures. Given the stock market's petulant resistance to decline, the eventual break lower will probably be violent when it occurs. However, the longer the market rally can resist arrest, the shorter the dip into the cycle low is likely to be, time-wise, because the window for terminating within the typical timing band is contracting. As such, one nasty down day will likely be enough to send me out of my shorts.

We still await confirmation of a primary decline for gold's daily cycle. While we have a swing high in place, the cycle trend line is still intact. Since gold is only two days short of eclipsing the typical 18 to 28-day timing band, we are facing a pretty good chance of seeing this cycle run a little long. With back-to-back extended cycles, we could then set expectations for the next cycle or two to run on the short side. I'll delve more into those prospects when the time comes.

Despite the weak close, there is now no question a new daily cycle is under way. The only question pertains to whether the buck will muster a decent bounce before rolling over again.